Emission Critical: Nuclear Sector Lags in US Energy Shift Policy

Wall Street Journal
By Brian Baskin
A DOW JONES NEWSWIRES COLUMN
NEW YORK (Dow Jones)--The U.S. nuclear power sector may have a few more years in the dark ages before its long-promised renaissance.
Nuclear power's image has improved as the prospect of emission-free power gradually overshadows concerns about accidents and storing waste. President Barack Obama has said nuclear power will be part of any plan to reduce greenhouse-gas emissions by 80% by 2050.
Yet nuclear power is still struggling to win unequivocal government and market support, even as developers prepare to break ground on the first new reactors since 1996. A new nuclear plant costs too much to compete with natural gas or coal. Opponents of the industry have successfully argued that nuclear is too mature a technology to receive new government incentives. Legislation aimed at building up alternatives to fossil fuels has largely left nuclear out in the cold. Some funds from the economic stimulus are also going to develop expensive and unproven technology to capture and store carbon emissions from coal-fired power plants.
Still, the nuclear rebirth is likely only delayed, not canceled. Federal funding is already available to build a handful of new reactors by the middle of the next decade. The Obama administration also aims to put a price on emissions, which would raise the cost of power from coal and gas relative to nuclear.
"More people are saying this technology has to be included in any long-term picture to lower emissions," said Will Pearson, an energy analyst with Eurasia Group, a consultancy in Washington, D.C. "The hard part...has just been costs. A lot has to happen for nuclear to really enjoy this renaissance people have been talking about."
Industry Wish List
The 26 proposed nuclear plants are for now an industry wish list. Nuclear plants are expensive - Progress Energy Inc. (PGN) recently estimated that two new reactors outside Tampa will cost $7 billion each. Duke Energy Corp. (DUK) plans to spend $1.8 billion to build a coal plant near Charlotte to produce nearly as much as one reactor.
"The cost of these plants is quite high...if you look at the companies sponsoring them, that's greater than their entire market capitalization," said Glen Grabelsky, a managing director at Fitch Ratings in New York.
The nuclear industry's expansion will depend heavily on a federal program offering loans for new plants. Utilities initially requested $122 billion from the $18.5 billion program, while a handful of projects are moving forward with private financing. The government will have choose only a few of these projects to award funds to.
Barring a dramatic change in the loan-guarantee program, four to eight nuclear plants are likely to be built by 2016, said Tom Kauffman, a spokesman for the Nuclear Energy Institute, a Washington, D.C.-based industry group.
"If this first small wave of new plants comes online on time and on budget, it will encourage people," Kauffman said. "The second round of plants (would then) be more successful as far as getting the support needed."
A request for additional loan guarantees was cut out of the economic stimulus in February. The nuclear industry is expected to try again in energy legislation later this year.
Opponents argue that nuclear power has already had a chance to prove its worth. Government support should be reserved solely for emerging technologies, which could see costs fall as they are more widely adopted, said Daniel Lashof, director of the Natural Resources Defense Council's Climate Center in Washington, D.C.
"Nuclear power has received the lion's share of subsidies over the last 40 years, and despite all that has not managed to create a competitive technology," Lashof said.
Without additional federal loans, the nuclear industry's best hope is for legislation requiring sharp cuts to emissions. A cap-and-trade system, which would mandate lower emissions and set up a market to trade carbon credits, has broad support in Washington, though the details have yet to be worked out.
Nuclear power would become more competitive as the cost of coal and gas-generated power rises. Some regions, including the Southeast, would also have difficulty generating significant power from renewables, and could turn to nuclear, Kauffman said.
(Brian Baskin has covered energy markets, including physical crude and oil futures, from Houston and New York for Dow Jones Newswires. He can be reached at 201-938-2062; brian.baskin@dowjones.com)
-By Brian Baskin, Dow Jones Newswires; 201-938-2062; brian.baskin@dowjones.com
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